GRANTHAM: One Of The Twin Pillars Of The Markets Is Looking Shakyhttp://www.businessinsider.com/jeremy-grantham-gmo-q2-letter-profit-margin-twin-pillars-shaky-2012-7/comments
en-usWed, 31 Dec 1969 19:00:00 -0500Sun, 02 Aug 2015 17:15:00 -0400Sam Rohttp://www.businessinsider.com/c/503cd7b369bedde04d000018karderimTue, 28 Aug 2012 10:37:39 -0400http://www.businessinsider.com/c/503cd7b369bedde04d000018
As good a negative real interest rates (free money) are for the financial service industry, they're pretty useless for boosting employment or, for that matter, any obvious component of the real economy.
<a href="http://www.trfragmanizle.com" target="_blank">http://www.trfragmanizle.com</a>
<a href="http://www.trfragmanizle.com/kategori/yeni-diziler" target="_blank">http://www.trfragmanizle.com/kategori/yeni-diziler</a>http://www.businessinsider.com/c/50193594ecad04c41600000bMajorWed, 01 Aug 2012 09:56:36 -0400http://www.businessinsider.com/c/50193594ecad04c41600000b
"Perhaps it's time for the Fed to work on it's second mandate"
Good point! Now that we're clear on the salubrious effect of low (and negative) real interest rates on financial service indutrys' profits -- it's time to reconsider if they're of any use in boosting our labor capacity utilization e(employment).
The data clearly says "No" -- as shown on the chart below of employment -- shown against real interest rates.
<a href="http://research.stlouisfed.org/fred2/graph/?g=84W" target="_blank">http://research.stlouisfed.org/fred2/graph/?g=84W</a>http://www.businessinsider.com/c/5019328aecad048712000017breezyWed, 01 Aug 2012 09:43:38 -0400http://www.businessinsider.com/c/5019328aecad048712000017
Perhaps it's time for the Fed to work on it's second mandate .. that of full employment. A consumer economy needs consumers. Low interest rates just allow the banks to "make money" on the still bad debt they hold by kicking that can down the road.
Without Main St stimulus we're caught in the trap of forever spiraling down into a world where no-one spends, like we saw in late 2008 to early 2009. We're only missing one or two triggers at this point.http://www.businessinsider.com/c/5019144eeab8eab21e000019JJ ButlerWed, 01 Aug 2012 07:34:38 -0400http://www.businessinsider.com/c/5019144eeab8eab21e000019
Today's anomalously high corporate margins are a function of the easy money world and thus unsustainable.http://www.businessinsider.com/c/5018c88beab8ea627c000013MajorWed, 01 Aug 2012 02:11:23 -0400http://www.businessinsider.com/c/5018c88beab8ea627c000013
The continuing and massive subsidies (fiscal, monetary, tax, regulatory and legal) conferred on our financial Services industry have, understandably, pumped up their profits to as much as 70% of ALL our nation's (after tax) corporate profits.
As good a negative real interest rates (free money) are for the financial service industry, they're pretty useless for boosting employment or, for that matter, any obvious component of the real economy.
How much have negative real interest rates boosted financial services' profitability. Well, here's a chart of the industries net. after tax profits -- as a percent of total National Income (in blue) -- shown against real interest rates (in red). <a href="http://research.stlouisfed.org/fred2/graph/?g=84Y" target="_blank">http://research.stlouisfed.org/fred2/graph/?g=84Y</a>
Perhaps it's time for our Fed to finally shift its support – from the 7% of GDP that’s Financial Services -- to the real economy -- and for letting the market set the cost of capital?